Arizona Business Owners Face Decades in Prison for Billion Dollar Healthcare Fraud
An Arizona couple pleaded guilty in a massive medical fraud scheme that bilked health insurers, including Medicare, out of $1.2 billion.
The couple were living the high life, collecting hundreds of millions of dollars, before law enforcement busted the scam.
Alexandra Gehrke and Jeffrey King of Phoenix pleaded guilty to making false and fraudulent claims to Medicare and other health insurance programs. Prosecutors say they bilked the federal government, including Medicare, TRICARE, and CHAMPVA, out of more than $900 million.
According to prosecutors, the scheme went like this:
The couple used sales consultants from two companies owned by Gehrke, Apex Medical LLC and Viking Medical Consultants LLC, to contact elderly patients, some of whom were veterans. The consultants were looking for patients “who had wounds at any stage and order amniotic wound grafts from a specific graft distributor.”
According to prosecutors, Gehrke instructed the sales reps to order grafts only in sizes 4x6 centimeters or larger, even if the wound was smaller, to maximize health insurance reimbursement. She received over $279 million in illegal kickbacks from the distributors in exchange for the orders. In turn, Gehrke paid sales reps tens of millions in unlawful kickbacks.
Gehrke then referred patents to a company co-owned by King, which hired nurse practitioners to apply the grafts.
Prosecutors say the duo had no medical training, but nevertheless directed nurse practitioners to apply grafts ordered by sales reps, even when they were not medically necessary. In some cases, the grafts were applied to infected wounds, wounds that already healed, and wounds that were not responding.
The duo then submitted the fraudulent claims for reimbursement to health insurers.
Restitution and Sentencing
Gehrke and King agreed to pay restitution in the amounts of $614.9 million and $605.6 million respectively. They also agreed to collectively forfeit over $410 million in funds obtained from the fraud.
Law enforcement seized nearly $100 million in assets from the couple, including $68 million in bank accounts, four luxury vehicles, $22 million in life insurance annuities, and jewelry and precious metals.
Gehrke will be sentenced on February 11,2025 and faces up to 20 years in prison. King also faces up to 20 years in prison. A sentencing date has not been set.
The case was investigated by the Department of Health and Human Services Office of Inspector General (HHS-OIG), the Defense Criminal Investigative Service (DCIS), the Department of Veterans Affairs Office of Inspector General (VA-OIG), and the Federal Bureau of Investigation (FBI).
